Via Financial Times

Taiwan Semiconductor Manufacturing, the world’s biggest contract chipmaker, is planning to build a fabrication plant in Arizona, in a victory for the White House, which is worried about the lack of US domestic capacity.

Two US officials and a source close to the company said TSMC — which makes chips for the world’s technology brands, from Apple to Huawei — was planning on announcing the move on Thursday evening Washington time.

The Trump administration has become increasingly concerned that the US is overly reliant on supply chains in Asia, particularly as China improves its semiconductor-making capabilities.

Eric Sayers, an Asia security expert and vice-president at consulting group Beacon Global Strategies, said TSMC’s decision to build a fabrication facility in Arizona was a critical development in that it underscored the Taiwanese company’s intention to “play a major role in the outgrowth of an advanced microelectronic ecosystem” in the US.

“Remaining the leader in this industry will be critical to future economic and military competitiveness,” said Mr Sayers. “At a geopolitical level, I can’t think of a better big idea for tying the US and Taiwan together than working to ensure the free world stays the leader.”

TSMC had long tried to resist pressure from Washington for a local fabrication plant, or fab, arguing that it could consider such a step only with government subsidies, because the absence of a full chip manufacturing supply cluster in the US would make the production cost much higher than in Taiwan.

But since the company controls half of the world market for made-to-order chips, the Trump administration has been targeting it in efforts to restore some domestic production of semiconductors needed for the defence industry.

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The US government is also focused on TSMC in its efforts to slow or even stop China’s technological advance. Huawei, the Chinese telecoms gear maker which the US said was helping the Chinese government engage in cyber espionage, accounts for about 10 per cent of TSMC revenue.

Washington has recently pushed Taiwan to pressure TSMC to restrict its production of semiconductors for Huawei. Washington is also concerned that China will be able to take advantage of the Taiwanese technology as it presses ahead with its own development of advanced semiconductors.

Taiwanese government officials have resisted US pressure to restrict TSMC and other Taiwan companies in selling to China, as the country’s position as a global supplier is its strategic advantage.

“TSMC, in its negotiations with the US government, needs to ensure that if they build a fab in the US, they will not be restricted in their ability to sell to any other customers from their fabs elsewhere, first and foremost in Taiwan,” said Kung Ming-hsin, a cabinet minister in charge of the economy.

The Trump administration has been exploring ways to further clamp down on the Chinese technology sector, including toughening its existing sanctions against Huawei. Officials are keen to more strictly limit which companies can sell to the Chinese telecoms equipment manufacturer, but have run into opposition from US chipmakers, which rely on China for around a third of their revenues.

While the decision by TSMC to build the facility in the US will be welcomed by the Trump administration, the president may also benefit from the decision to locate the plant in Arizona. The southwestern state is viewed as a swing state in the November presidential election, and Republicans are also trying to avoid losing a Senate seat, in one of the races that will be critical to determining whether they retain their majority in the upper chamber.

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The US commerce department did not immediately respond to a request for comment. TSMC declined to comment. The Wall Street Journal first reported the development.

Additional reporting by Kiran Stacey